Partnership Dispute Lawyers Brisbane
A company protects you from your co-owner’s decisions. A partnership does not.
That single difference is why partnership disputes escalate faster than corporate ones. Each partner can bind the firm. Each partner can be personally liable for what the others commit it to. While a dispute runs, your co-partner is still holding themselves out as your agent, still signing, still incurring obligations you will be asked to meet.
Boyle Litigation acts for partners in trading partnerships, professional practices and family partnerships across Queensland and nationally, in disputes about conduct, money, exit and dissolution. Litigation is the only work we do.
What the Partnership Act supplies when your agreement does not
Many partnerships operate without a written agreement, or with one that was signed a decade ago and no longer reflects how the business is run. Where the agreement is silent, the Partnership Act 1891 (Qld) fills the gap, and the default position surprises most partners.
| Issue | The usual default position |
|---|---|
| Duration | A partnership with no fixed term is generally a partnership at will, which a partner can dissolve by giving notice |
| Profit sharing | Partners generally share profits and losses equally, regardless of unequal contributions of capital or effort |
| Expulsion | There is generally no power to expel a partner unless the agreement expressly provides one |
| Major decisions | Ordinary matters are usually decided by majority, but changing the nature of the business generally requires unanimity |
| Authority | Each partner is generally an agent of the firm and can bind it in the ordinary course of business |
| Liability | Partners are generally liable for the debts and obligations of the firm, which means personal exposure |
| Duties between partners | Partners owe each other duties of good faith, including to render true accounts and to account for private profits made from the partnership |
Advantage
Payment claim
Why it matters commercially
The earlier of the period stated in the contract and 15 business days after the payment claim is given
A partnership at will can be ended by notice.
That is a substantial piece of leverage, and it cuts both ways. It can be the fastest route out of an intolerable arrangement, or it can be used against you at the worst moment. Whether it is available, and what happens to the business if it is exercised, should be understood before anyone threatens it.
Disputes we act in
- Dissolution of partnership, by notice, by agreement, or by court order
- Applications to the court to dissolve a partnership on just and equitable grounds
- Expulsion of a partner, and challenges to an expulsion that was not validly exercised
- Breach of the duties partners owe each other, including diverting business, secret profits and competing with the firm
- Taking of accounts, where a partner has not accounted properly for partnership money or dealings
- Capital account, drawings and loan account disputes
- Valuation of a partner’s interest on exit, including goodwill and work in progress
- Misuse or removal of partnership property, client lists and records
- Restraint of trade and non-solicitation obligations after a partner leaves
- Liability to third parties, including creditors of the firm and claims arising from another partner’s conduct
- Appointment of a receiver over the partnership pending dissolution or winding up
- Disputes on the admission or retirement of a partner
Professional practices
Accounting, medical, dental, allied health and consulting practices carry their own dynamics. The value is in the fee base and the client relationships, both of which can walk out the door in a week. Regulatory and licensing obligations sit on top of the commercial dispute, and clients or patients are affected by the outcome whether or not anyone intends it.
These disputes are usually resolved on a negotiated separation rather than at trial, but the terms of the separation depend on who established leverage first, and on whether the departing partner’s obligations were secured before they left.
Dissolution and winding up
Dissolution ends the partnership. It does not end the work. The firm’s assets have to be realised, its debts paid, and the surplus distributed, and the sequence in which that happens is a frequent source of dispute in itself.
- Establish whether the partnership has been dissolved, and by what mechanism.
- Secure the assets and the records. Bank accounts, client files, work in progress, and the books.
- Determine what is partnership property and what belongs to individual partners, which is often contested.
- Take accounts, including an account of any private profits or unauthorised drawings.
- Realise assets, discharge liabilities, and distribute the surplus in the correct statutory order.
Where partners cannot cooperate in that process, the court can appoint a receiver to conduct the winding up. Where a partner is dealing with firm assets or holding out authority they no longer have, urgent relief may be needed first.
Urgent situations
- A partner is taking clients, staff or referral relationships
- Partnership funds are being withdrawn, or bank authorities have been changed
- You have been locked out of the premises, the accounting system or the client files
- A partner is incurring obligations in the firm’s name that you will be asked to meet
- A notice of dissolution has been given or threatened
- A creditor is pursuing you personally for a partnership debt
The last one deserves emphasis. Personal liability means a partnership dispute can reach your own assets while the argument about who was at fault is still unresolved. If that risk is live, it is the first thing to deal with.
How we approach a partnership dispute
- Establish what the partnership is, what documents govern it, and what the Act supplies where they are silent.
- Assess personal exposure first. What you may be liable for changes the strategy more than anything else.
- Secure the record and, where necessary, the assets.
- Identify the leverage. Dissolution rights, information rights, restraint obligations, and the other side’s dependence on the business continuing.
- Define the exit or the outcome you need, then negotiate from strength or litigate.
Why Boyle Litigation
- Litigation only. We do not prepare partnership agreements. We resolve disputes under them.
- Our Managing Partner is one of 33 Queensland Law Society Accredited Specialists in Commercial Litigation, from more than 14,000 practising solicitors in the state.
- Personal exposure assessed first, because in a partnership it is the risk that most often decides what strategy makes sense.
- Fast where a business or a fee base is being taken. Injunctions and urgent relief handled without a queue.
- Discreet. Practice disputes are watched by staff, clients and referrers. We act accordingly.
The last one deserves emphasis. Personal liability means a partnership dispute can reach your own assets while the argument about who was at fault is still unresolved. If that risk is live, it is the first thing to deal with.
Frequently asked questions
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How do I get out of a business partnership?
It depends on what the partnership agreement says. Where there is an agreement, it usually sets out a retirement or exit process and how the departing partner’s interest is valued and paid. Where there is no agreement or it is silent, a partnership with no fixed term is generally a partnership at will, which a partner can dissolve by giving notice to the others. Dissolution is not the end of the process, because the firm still has to be wound up and the accounts taken. Advice should be taken before notice is given, because the timing affects what you receive.
Can I be expelled from a partnership?
Only if the partnership agreement gives the other partners that power, and only if it is exercised in accordance with the agreement and in good faith. There is generally no default right to expel a partner under the Partnership Act. Where an expulsion has been attempted without a valid power, or without following the required process, it can be challenged, and the attempt itself may amount to a breach by the other partners.
Am I personally liable for my business partner’s debts?
Generally, yes, and this is the central risk of the structure. Partners are ordinarily liable for the debts and obligations incurred by the firm, and a partner acting in the ordinary course of the firm’s business can bind the others. Liability can extend to obligations you did not know about. If a partnership dispute is underway and your co-partner is still transacting in the firm’s name, limiting further exposure is usually the most urgent issue on the file.
What duties do partners owe each other?
Partners owe each other duties of good faith and loyalty. These include rendering true accounts and full information about partnership affairs, accounting to the firm for any private benefit obtained from the partnership, its property or its business connections, and not competing with the firm without consent. Where a partner has diverted business or made a secret profit, remedies can include an account of profits, which is often more valuable than a damages claim.
Can a court dissolve a partnership?
Yes. The court can order dissolution in a number of circumstances, including where a partner is permanently incapable of performing their part, where a partner has been guilty of conduct that prejudicially affects the business, where a partner persistently breaches the agreement or conducts themselves so that it is not reasonably practicable to carry on in partnership with them, where the business can only be carried on at a loss, and where it is otherwise just and equitable to do so. These applications are fact intensive and the evidence needs to be assembled properly before the application is made.
How is a partner’s share valued when they leave?
If the agreement specifies a valuation method, that generally governs. Where it does not, valuation becomes one of the main areas of dispute, particularly over goodwill, work in progress, and whether the business should be valued as a going concern or on a break up basis. Capital accounts, loan accounts and drawings all have to be reconciled as part of the exercise. Independent valuation evidence is usually required and the instructions given to the valuer matter considerably.
What happens to clients and staff when a partnership breaks up?
This is where the real value is fought over, particularly in professional practices. The position depends on any restraint of trade and non-solicitation obligations in the partnership agreement, on the duties partners owe each other while the partnership subsists, and on what has actually happened. Restraints are enforceable where they go no further than reasonably necessary to protect a legitimate interest. Where a partner has begun approaching clients or staff, urgent injunctive relief may be available, but delay weakens it.
Do we have a partnership if we never signed anything?
Possibly. A partnership exists where persons carry on a business in common with a view to profit, and no written agreement is required for one to exist. Arrangements described as joint ventures, informal business arrangements between family members, and profit sharing arrangements are all sometimes found to be partnerships. That finding matters because it brings personal liability and the default rules of the Partnership Act with it.